The Australian share market is expected to open lower as U.S. stocks on Wall Street experience another wave of volatility on Monday.
The ASX futures ended down -98 points, or -1.4%, to 7,118, while our local currency, the Australian dollar, is currently buying US$0.7254 (as of writing).
It was another wobbly session for iron ore overnight after the spot fell -8.8% to $US92.98 a tonne.
The day had started ugly on Wall Street, as all three major U.S. stock indexes opened deep in the red as traders worried over the fate of Evergrande, one of China’s biggest developers that is awash in debt of more than US$300 billion and teetering on collapse.
Investors also grappled with the threat of a government shutdown and uncertainty over the Federal Reserve’s monetary policy, which has helped to fortify the economy since the initial shocks of the pandemic.
At the finishing bell, on the New York Stock Exchange (NYSE), the broad-based Standard & Poor’s 500 Index, which notched back-to-back losses the past two weeks, dropped -75.26 points, or -1.70%, to settle at 4,357.73.
The blue-chip Dow Jones Industrial Average fell as much as -971 points in afternoon trading before paring back its losses and ended down -614.41 points, or -1.78%, and settled at 33,970.47.
Meanwhile, the rich-tech Nasdaq Composite Index pulled back even further, falling -2.19%, or -330.1 points, to end at 14,713.9.
On Monday, Bitcoin suffered a sharp fall after dropping more than -9% to trade near $US40,067 and is currently trading at $US41,800 (as of writing).
News sources reported the Evergrande Group is the most debt-laden property developer globally, with liabilities in excess of $300 billion.
This month, it sounded the alarm that it could not keep up with its obligations to lenders, investors and suppliers.
Construction on many of its projects has halted and, amid a wider debt crackdown in Beijing, concerns are mounting that the company’s failure could spark a broader crisis in the real estate market, a key engine of China’s economy.
Some experts have compared the distress of Evergrande to the fall of Lehman Brothers in 2008, one of the largest casualties in the global financial crisis.
Looking ahead to this week’s economic data, the U.S. Federal Open Markets Committee’s (FOMC) begins their two-day policy meeting Tuesday ahead of its policy announcement on Wednesday afternoon (Thursday 4 am Sydney time).
Eyes will be on what U.S. Fed Chair Jerome Powell says at a post-meeting news conference Wednesday, especially concerning inflation, economic growth, interest rates and when the Fed will likely start reducing its purchases of government bonds.
Meanwhile, on Tuesday, is the release of the minutes from the Reserve Bank of Australia, which could tilt to a dovish tone after the RBA governor Philip Lowe said last week, the central bank does not expect to lift the cash rate until 2024.
Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator holds a negative bias, although it is in an extreme oversold condition.
Meanwhile, the Moving Average Convergence Divergence (MACD) continues to hold to a negative signal.
The Average Directional Movement Index (ADX) trend indicator holds to a bearish trend.
Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.
RSI oscillates between zero and 100.
According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.
Signals can also be generated by looking for divergences, failure swings and centreline crossovers.
RSI can also be used to identify the general trend.
Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.
The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.
(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price strengthens or weakens.
Due to the oversold technical signals, renewed demand is expected, which expects around of short term demand.
The support levels are considered at 7,215 (minor) with 7,180 considered beneath, while the resistance is considered minor at 7,265, with 7,300-15 located above.
Daily outlook on the benchmark S&P/ASX 200
On Monday, the Australian sharemarket took further casualties as iron ore prices continued to weigh heavy on the Index as iron ore dropped -5.4% to $US100.80, and futures hit a 14-month low of $US99.70 on Friday.
At the closing bell, the benchmark S&P/ASX 200 index fell -155.5 points, or -2.10% to 7,248.2, while the All Ordinaries lost -165.0 points, or -2.14%, to 7,537.9.
Ten out of eleven sectors ended in negative territory, with Materials plummeting -3.74%, and Energy dropped -4.16%.
Titans, BHP Group, fell -4.16% and settled at $37.53, while Rio Tinto lost -3.6% to $95.24 and Fortescue Metals Group dropped -3.73% to settle at $14.70.
Gold stocks were negative, with Newcrest Mining falling -1.81% to $23.35, Northern Star Resources lost -1.19% to $9.16, and Evolution Mining fell -2.11% to $3.71.
The Financial sector was weaker, with only Westpac Banking Corp leading the “Fab Four” (banks) lower after falling -2.24% to $25.30, while Australia and New Zealand Banking Group lost -2.02%, to $27.14, with Commonwealth Bank ended down -2.01% to $100.81, National Australia Bank tumbled -2.02%, to $27.14, and Macquarie Group dropped -3.6% and settled at $173.69.
Buy-now-pay-later giant Afterpay lost -2.17%, to $125.60, Accounting software provider Xero fell -4.53%, to $146.40, Altium lost -2.04%, to $35.54, EML declined -3.65%, to $3.70, Zip Co rose +6.73%, to $6.38 and WiseTech Global dropped -2.75%, to $51.33.
The Health Care was ended weaker, as Biotechnology giant CSL falling -0.63%, to $307.41, while ResMed dropped -2.63%, to $38.50, Fisher & Paykel Healthcare lost -0.35%, to $31.39, Cochlear tumbled -1.43%, to $234.87.
As for our oil and gas producers, a rising US dollar helped pushed oil prices lower, which weighed on the energy sector as Woodside Petroleum lost -2.51% to $20.58, Oil Search lost -3.13% to $3.72, Santos dropped -3.32% to $6.12, and Worley tumbled -3.13%, to $9.28.
Power grid owner AusNet surged +19.2% to $2.36 after receiving a $9.6 billion takeover offer from Canadian giant Brookfield.
The $2.50 per share cash offer is the third Brookfield has proposed since late August and represents a 26% premium to AusNet’s closing price on Friday.
Supermarket giants Coles and Woolworths were mixed, with Coles climbing +0.18% to $16.94, while its rival Woolworths lost -0.46% to $39.21, and Endeavour rose +2.17%, to $6.58.
E-commerce group Kogan lost -4.73% and settled at $9.46, Seek fell -3.36% to $29.59, and AMP shares fell -4.55% to $0.945.
Transurban shares were halted before the market opening before confirming reports by news sources that it secured the remaining 49% stake in Sydney’s newest motorway, WestConnex, from the NSW government for $11.1 billion.
Travel stocks were mixed, with Sydney Airport lost -1.45% to $8.18, Corporate Travel Management lost -2.62%, $20.80, Flight Centre lost -2.5% to $17.97, Webjet slid -2.03% to $5.80, and Qantas ended down -2.71%, to $5.38.